-0.15. That's the correlation between the above two systems after analysing monthly returns over the past 8 years. One is my longterm trend following system (LTTF) that I have traded for about 20 months, and the other is the low exposure system described in this blog recently. Lets call that a short term mean reversion system (STMR). Due to the low correlation, the combined performance of both systems in a portfolio will perform better than either system on their own, as the table shows.
The graph shows the monthly returns of both systems. As you can see, the STMR system performs better in the past year or so and also near the beginning of the test. It seems to like the volatility that often comes with market crashes. The LTTF system outperforms in between.
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